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Outline the reasons why you think this asset should impaired

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Question - Bobs Ltd owns a plant that originally cost P700 000 on 01/01/2010 and has a carrying amount of P350,000 at 31/12/2015. The plant is depreciated on a straight line basis to a zero residual value over a 10 year useful life. As per IAS 36 Bobs Ltd performed an indicator reviews at 31/12/2015 to asset whether this asset might be impaired.

Initial information collected for the purpose of the review included: The accountant budgeted that net cash inflows will be slightly reduced over the next 3 years of usage, due to a drop in the market demand for the plant's output. The accountant's opinion is that there will be no market for the plant's output after 31/12/2018.

The estimated fair value of the plant is P250,000.

Required - Outline the reasons why you think this asset should be impaired.

Reference no: EM133187303

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